Global Cement Newsletter

Issue: GCW659 / 15 May 2024

Headlines


Before Russia invaded mainland Ukraine on 24 February 2023, many predicted that full-scale conflict would be averted. When the attack began, Russian President Vladimir Putin himself expected a 10-day war, according to think tank RUSI. 15 May 2024 marks two years, two months and three weeks of fighting, with no end in sight.

Ukrcement, the Ukrainian cement association, recently published its cement market data for 2023, the first full year of the war. The data showed domestic cement consumption of 5.4Mt, up by 17% year-on-year from 4.6Mt in 2022, but down by 49% from pre-war levels of 10.6Mt in 2021. In 2023, Ukraine’s 14.8Mt/yr production capacity was 2.7 times greater than its consumption, compared to 1.4 times in 2021. Of Ukraine’s nine cement plants, one (the 1.8Mt/yr Amwrossijiwka plant in Donetsk Oblast) now lies behind Russian lines. Four others sit within 300km of the front line in Eastern and Southern Ukraine. Among these, the 4.4Mt/yr Balakliia plant in Kharkiv Oblast, the largest in the country, first fell to the Russians, but was subsequently liberated in September 2022.

Before the war, Ukrcement’s members held a 95% share in the local cement market. Their only competitors were Turkish cement exporters across the Black Sea, after the Ukrainian Interdepartmental Commission on International Trade successfully implemented anti-dumping duties against cement from Moldova and now-sanctioned Belarus and Russia in 2019. Since then, Turkish cement has also become subject to tariffs of 33 – 51% upon entry into Ukraine, until September 2026. The relative shortfall in consumption has led Ukraine’s cement producers to lean on their own export markets. They increased their exports by 33% year-on-year to 1.24Mt in 2023, 330,000t (27%) of it to neighbouring Poland.

Russia’s invasion has made 3.5m Ukrainians homeless and put the homes of 2.4m more in need of repair. In a report published in Ukrainian, the US Agency for International Development (USAID) set out its three-year rebuilding plan for the country. USAID projects an investment cost of €451bn, with the ‘main task’ besides homebuilding being to increase the share of industrial production in the economy. Ukraine is 90% equipped to produce all building materials required under the plan. Their production, in turn, will create or maintain 100,000 jobs and US$6.5bn in tax revenues. Reconstruction will also involve the Ukrainian cement industry returning to close to full capacity utilisation, producing 15 – 16Mt/yr of cement.

CRH, an established local player of 25 years, looks best set to claim a share of the proceeds. Stepping down an order of magnitude from billions to millions, Global Cement recently reported CRH’s total investments in Ukraine to date as €465m. Since war broke out, the company has more than tripled its rate of investment, to €74.5m. The Ireland-based group is in the protracted administrative process of acquiring the Ukrainian business of Italy-based Buzzi. If successful, the deal will raise its Ukrainian capacity by 56%, to 8.4Mt/yr – 57% of national capacity. This unusual clumping of ownership may be made possible by the participation of European Bank for Reconstruction and Development in partly acquiring the assets, as per a mandate letter signed with CRH in 2023.

Leading Ukrainian cement buyer Kovalska Industrial-Construction Group bemoaned the anticipated increase in market concentration. On the one hand, this sounds like a classic tiff between cement producers and users with shallow pockets. On the other hand, an antebellum allegation of cement industry cartelisation should give us pause for thought. Non-governmental organisation The Antitrust League previously reported Ukraine’s four cement producers to the government’s Anti-Monopoly Committee for alleged anticompetitive behavior. This was in September 2021, when Ukraine was barely out of lockdown, let alone up in arms. With all that has happened since, it may seem almost ancient history, yet the players are the same, CRH and Buzzi among them.

Ukrcement and its members have secured favourable protections from the Trade Commission, and, for whatever reasons, evaded the inconvenience of investigation by the Anti-Monopoly Committee – a state of affairs over which the Antitrust League called the committee ‘very weak.’ The league says that producers previously raised prices by 35 – 50% in the three years up to 2021. In planning a fair and equitable reconstruction, Ukrainians might reasonably seek assurance that this will not happen again.

All these discussions are subject to a time-based uncertainty: the end of the war in Ukraine. A second question is where the finances might come from. The EU approved funding for €17bn in grants and €33bn in loans for Ukraine on 14 May 2024. Meanwhile, countries including the UK have enacted legislation to ensure Russia settles the cost of the conflict at war’s end. If Ukraine achieves its military aims, then the finances may flow from the same direction as did the armaments that demolished Ukrainian infrastructure in the first place.

The first piece of Ukraine annexed by Russia was Crimea in February 2014, making the invasion over a decade old. Against such a weight of tragedy, the country cannot lose sight of the coming restoration work, and of the need to ensure that it best serve Ukrainians.


Switzerland: Holcim has appointed Marco Maccarelli as its Director of Central and Eastern Europe. He will succeed Simon Kronenberg in the post in June 2024, according to the 24 Heures newspaper. The position includes the responsibility of head of Holcim Schweiz.

Maccarelli is currently working as the CEO of Holcim Colombia. Prior to this, he worked for Holcim Mexico first as Director Innovation and Commercial Development and later as Director Cement Sales & Retail. He has worked for Holcim for over 15 years and holds more than 20 years’ experience in the construction sector.


Canada: Lafarge Canada and Geocycle Canada have successfully completed a pilot at the Lafarge Brookfield cement plant in Nova Scotia to produce clinker using recycled minerals from discarded material. This pilot can potentially cut CO₂ emissions by 60% of clinker. The new clinker product will be used to produce recycled cement in 2024.

CEO of Lafarge Canada David Redfern said "Our teams have been tirelessly working towards finding solutions to decarbonise our business in Canada. This new recycled-minerals clinker combines operational excellence with circular construction, building new and green from what is considered old and waste. This is a great example of how far we can go - the local team at Brookfield is certainly setting the tone for the industry in Canada."

Since May 2023, Lafarge Canada, Geocycle Canada and the Holcim Group Innovation Centre have been collaborating on a 100% circular production of clinker at the Brookfield plant. The new production method involves substitution of raw materials with lower carbon options from discarded materials, as well as alternative fuels produced from these materials. The trial was performed in February 2024 and cement from this clinker will be produced in 2024 for further testing and development of the technology.


Brazil: Votorantim Cimentos reported a significant decrease in net profit to US$3.3m in the first quarter of 2024, down from US$15.2m in the same period last year. Despite a 1% increase in cement sales volume to 8.1Mt, net revenue fell by 6% to US$1bn, primarily attributed to the inflation of the Brazilian real. The company's adjusted earnings before inflation, taxation, depreciation and amortisation (EBITDA) remained stable at US$149m.

In Brazil, revenue stayed level at US$585m, though EBITDA dropped by 6%. North American operations saw a 7% decline in revenue, impacted by lower sales volumes and adverse exchange rates, with EBITDA at US$3.3m, improving from a US$9.2m loss in the first quarter of 2023.


US: Cemex has entered an off-site renewable energy agreement for its Clinchfield Cement Plant with Georgia Power, securing about 25% of its power from solar facilities throughout the state, starting in 2025. The plant will offset roughly 10,000t/yr of indirect CO₂ emissions, contributing to a 58% reduction target in Scope 2 GHG emissions from its 2020 levels by 2030.

Senior Vice President of Cemex US Ernesto Felix said "Embracing solar power not only accelerates our own aggressive sustainability goals but also sets a powerful example for the entire industry. By integrating renewable energy solutions through Georgia Power, Cemex paves the way for a greener, more resilient future for generations to come."


India: Shree Cement recorded a net profit of US$80m for the quarter ending 31 March 2024, up by 21% year-on-year from US$65m. The company's net revenue also rose by 7% to US$610m during the same period, compared with US$573m in 2023. Operating expenses decreased by 3% year-on-year to US$472m.


Japan: Taiheiyo Cement recorded a profit of US$276m for the financial year ending March 2024, following a loss of US$212m in 2023. Sales significantly increased to US$5.7bn. Domestic demand for cement is stable due to urban redevelopment projects and the construction of new logistics facilities. On the other hand, rising costs and delays to construction work and longer construction periods due to a shortage of workers resulted in output declining by 7.3% year-on-year to 34.6Mt.

Looking ahead to the 2025 financial year, Taiheiyo Cement expects a 43% year-on-year rise in net profit to US$396m and anticipates sales to grow by 8.3% year-on-year to US$6.1bn.


Sweden: Peab has entered a product delivery agreement with Stockholm-based start-up CemVision, starting from 14 May 2024. CemVision has developed a cement that reportedly reduces CO₂ emissions by over 95% compared to traditional cement, by replacing limestone and fossil fuels with refined industrial waste and renewable energy. Over the next few years, Peab will use CemVision's ultra-low carbon cement for various projects, including infrastructure, water treatment, foundation work and prefabricated concrete.

Oscar Hållén, CEO of CemVision, said “We are thrilled to be able to deliver our product to Peab. We see that green cement has become crucial for entire industries to be able to meet their climate commitments. The demand is already enormous and all forecasts indicate that it will only increase.”


India: JK Cement reported a net profit of US$28.1m for the quarter ending 31 March 2024, up by 47.5% year-on-year from US$19.2m. Net revenue increased by 23.3% to US$352m in January – March 2024, compared to US$285m in the same period in 2023. Operating expenses for the quarter rose by 18.2% to US$286m from US$242m in 2023.


Türkiye: Türkiye's cement exports to Azerbaijan dropped by 10.5% in January - April 2024, to US$16m, compared to the same period in 2023. In April 2024, exports to Azerbaijan fell by 16% to US$4.1m, according to the Turkish Ministry of Trade. Türkiye's global cement exports decreased by 8% to US$1.4bn from January to April 2024. Cement exports in April 2024 experienced a 9.2% year-on-year decline, to US$339m. From April 2023 – April 2024, Türkiye's total cement exports were valued at US$4.5bn.


Nigeria: Lafarge Africa has reported a decline in net income for the first quarter ending 31 March 2024. Sales rose to US$98m from US$63.2m in 2023, but net income fell to US$3.6m from US$10.3m in 2023.


India: JSW Cement will establish its first cement plant in the north of the country at Nagaur, Rajasthan. The new site will begin with a capacity of 3.3Mt/yr, eventually expanding to a capacity of 15Mt/yr by 2026.

Managing director Parth Jindal posted on X "Extremely proud that JSW Cement is entering North India, today we have broken ground at our site in Nagaur, Rajasthan. A new beginning for JSW, one that will see us becoming a pan-Indian cement player by 2026.”


Argentina: Loma Negra reported a substantial 27% year-on-year drop in sales to US$123m and a 34% reduction in adjusted earnings before interest, depreciation and amortisation (EBITDA) to US$42m in the first quarter of 2024, impacted by declining cement volumes. This financial report coincides with its parent company InterCement's discussions to sell Loma Negra's operations in Brazil and Argentina to Compañía Siderúrgica Nacional. Although lower demand affected cement dispatch, it was also particularly affected by the political transition and economic environment, as well as adverse weather conditions in March 2024.

CEO Sergio Faifman said "The stabilisation plan being implemented by the new government after the strong devaluation in December has made rapid progress by significantly reducing inflation and achieving a fiscal surplus, but economic activity is still in negative territory, affecting the construction industry."


Jamaica: Caribbean Cement is allocating US$8m, 20% of its planned US$40m investment in 2024, to increase sustainability efforts at its Rockfort plant. The company is aiming to become net-zero by increasing its use of alternative fuels and repurposing materials like tyres, which will also help to save on operational expenses and fuel costs, according to the company.

The repurposing of tyres, which commenced following a Government of Jamaica partnership, will remove a ‘significant’ portion of the estimated 1.5m tyres at the country’s Riverton dump, along with other materials such as pallets, which Caribbean Cement now uses as alternative fuel sources in the cement manufacturing process. With the help of its XRC3000c shredder obtained from Austria-based company UNTHA, Caribbean Cement said it has shredded more than 9000 tyres to date.

Managing director Jorge Martínez said “At the moment our first goal for the end of 2024 is to at least reach 10% alternative fuels. We will remove some of those fuels that are not renewable, substituting it with ones that are. This is part of our future in action programme. Some of these actions are also related to the reuse of some materials in the plant as we take waste materials from other industries and beach clean-ups for repurposing. We try to reuse them in any way we can.”


US: Cemex has contested Boulder County's decision to terminate its right to operate the Lyons cement plant and is calling for the decision to be reversed, citing ‘significant’ implications for the state and local employment. The dispute follows a notice from the Boulder Country Community Planning office in April 2024, attributing increased traffic as the primary reason for the termination. The county and the Colorado Department of Transportation began investigating the plant in 2022, after residents of the area complained.

Cemex stated in its response to Boulder County "The Department's conclusion did not take into account the historical trucking of material to and from the Lyons cement plant, relying instead on a study Cemex voluntarily undertook for the Colorado Department of Transportation for a different purpose, and that considered only three days of traffic data in each of two consecutive years. The determination also failed to apply applicable precedent that a nonconforming use does not terminate when traffic occurring off-site changes."

The Community Planning and Permitting Director will now review the additional evidence brought forth by Cemex and issue an additional determination. Depending on the outcome, Cemex will have the option to appeal the decision to the Boulder County Board of Commissioners. The closing of the Lyons plant would lead to the loss of 100 jobs and only two cement plants remaining in Colorado.


Ireland: CRH has reported a positive start to 2024, with total revenues reaching US$6.5bn in the first quarter of 2024, marking a 2% year-on-year increase from US$6.4bn in the same period of 2023. The company attributes this growth to early-season project activity and favourable weather in parts of the US, alongside gains from pricing strategies and acquisitions which helped counterbalance lower volumes in Europe. CRH turned a net income of US$114m, an improvement from a net loss of US$31m in the first quarter of 2023. Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) also rose by 15% year-on-year to US$445m.

As a reward for investors following this profit rise, CRH has launched an additional US$300m share buyback. This new tranche, set to be completed by 7 August 2024, follows the US$600m in shares the company has already repurchased this year as part of its ongoing buyback programme. CRH also indicated it would continue to evaluate its buyback strategy throughout the remainder of 2024.

Albert Manifold, CEO, said "We are pleased to report a good first quarter performance in what is the seasonally least significant period for our business. That performance was supported by positive pricing momentum, early-season project activity, favourable weather in certain regions and the contribution from acquisitions.”


US: Cemex, in collaboration with the Mission Possible Partnership (MPP) and supported by the Bezos Earth Fund, is undertaking an analysis of decarbonisation strategies at its Balcones cement plant in Texas, US. This initiative is part of Cemex's broader goal to achieve net-zero CO2 emissions by 2050. The analysis will explore various technological pathways including the use of alternative fuels, incorporation of lower-carbon materials, carbon capture and storage and the utilisation of captured carbon for producing synthetic fuels, chemicals, or construction materials. The partnership focuses on innovations such as substituting traditional fossil fuels with waste, renewable gas, biomass, hydrogen and electrification in the cement production process.

CEO of Cemex, Fernando González said “Our collaboration with the Mission Possible Partnership represents a joint effort seeking to accelerate our sustainable commitments and comprehensively evaluate the extent to which we can utilise decarbonisation levers within a specific plant ecosystem. This involves leveraging scalable technologies that would contribute to achieving our ambitious decarbonisation goals on the path to becoming a net-zero company by 2050.”


Italy: Cementir Holding has disclosed its financial results for the first quarter of 2024, showing a mixed performance. While the company saw growth in volumes compared to 2023, with cement up 2.3%, ready-mixed concrete up 3.7% and aggregates up 8.9%, financial metrics indicated some challenges.

Revenue for the quarter stood at €368m, marking an 11.2% decrease from €415m in the same period of 2023. Similarly, earnings before interest, depreciation and amortisation (EBITDA) fell by 18.1% year-on-year to €66.5m, down from €81.2m in the first quarter of 2023. The company's profit before taxes also declined by 8.2% year-on-year to €58.7m from €63.9m. However, Cementir Holding reported net cash of €76.6m, a substantial increase from a net financial debt of €32.1m as of 31 March 2023.


India: Top executives from major cement manufacturers project stable prices and decreased costs for the fiscal year 2024-25 (FY25), with some anticipating moderate growth in demand. This follows an estimated 8-9% growth in cement demand for the FY24 in India.

During a recent post-earnings call, Atul Daga, CFO UltraTech Cement, said "Our belief is that the slowdown should be shorter than in earlier years, primarily because private sector housing has also picked up momentum."


UK: C-Capture has initiated a carbon capture trial at Heidelberg Materials’ Ketton cement works in Rutland, as part of its national 'XLR8 CCS' project aimed at accelerating low-cost carbon capture solutions in industries like cement and glass. The trial utilises C-Capture’s technology, which employs a solvent to selectively capture CO₂ from emissions. According to the company, this process does not rely on the use of amines, therefore requiring 40% less energy than conventional methods and reduces costs. The carbon capture solvent compatibility unit designed by C-Capture and partner Wood will test the effectiveness of this technology in removing CO₂ from flue gas emissions produced during the cement manufacturing process.

XLR8 CCS is funded with €2m from the Department of Energy Security and Net Zero’s €1.2bn Net Zero Innovation Portfolio. The funding is part of the €23m Carbon Capture, Usage and Storage (CCUS) Innovation 2.0 programme aimed at accelerating the deployment of next-generation CCUS technology in the UK. Additional private sector contributions support a €3.1m total.

C-Capture CEO Tom White said "Decarbonising industry is one of the most pressing global issues. C-Capture’s XLR8 CCS project is a critical step in the race to net zero as we work with our innovative technology and leading industry partners to demonstrate that an affordable carbon capture solution is a reality – even for industries that are difficult to decarbonise. We are incredibly proud to be working with our project partners which have strong commitments to decarbonisation and are early adopters of novel carbon capture technology."

Simon Willis, CEO of Heidelberg Materials UK said “Carbon capture is a critical part of our strategy to decarbonise cement production and essential if we are to reach net zero and help our customers achieve their own decarbonisation goals. Our venture with C-Capture is another example of our commitment to developing new technologies and, if successful, has the potential to be rolled out at other sites across the Heidelberg Materials Group.”


Ukraine: The cost to rebuild Ukraine post-war is projected at US$487bn, according to a report commissioned by the United States Agency for International Development. The report states that to support the reconstruction, Ukraine must produce 15-16Mt/yr of cement for three years, a significant increase from current capacities. Protectionist measures in place since 2019 have restricted cement imports and a decline in production and a shrinking market could lead to an increase in construction costs, according to the Kyiv Independent.

Amid these projections, CRH, which operates three plants in Ukraine, announced in summer 2023 that it aims to purchase two more from Buzzi's subsidiary Dyckerhoff. This deal is valued at €100m, with the company stressing the importance of its investments in Ukrainian cement plants to boost the country’s domestic production to 15Mt/yr, according to Forbes Ukraine. The deal is reportedly under scrutiny by Ukraine's Anti-Monopoly Committee due to market concentration concerns, which could drive up cement prices and overall reconstruction costs.

Serhiy Pylypenko, CEO of the Ukrainian building supplies firm Kovalska, Ukraine’s largest cement user, said “We need more players and to diversify the market instead of making it more compact because the competition is very weak. Market concentration allows uncontrolled pricing and the cost of construction and the cost of recovery to skyrocket."


Brazil: Cement sales in April 2024 totalled 5.1Mt, up by 12% year-on-year. Compared to March 2024, sales rose by 4%, as reported by the National Cement Industry Union (SNIC). April 2024 sales have increased following a forecasted rise despite earlier climate-related impacts.

President of SNIC, Paulo Camillo Penna, said "After two consecutive years of falling sales and idle capacity of around 35%, the Brazilian cement industry hopes to reverse this performance, influenced by progress in housing and infrastructure projects. The sector is betting on the growing use of cement and concrete in road and urban paving, as municipalities and states such as Santa Catarina, Paraná, Goiás, Maranhão, Ceará, São Paulo and the Federal District are leading the way in the use of these inputs."


Barbados: Trinidad Cement, owners of Arawak Cement Company, noted a decline in the Barbados cement market in 2023, according to its annual report.

Managing director Francisco Aguilera Mendoza said "In Barbados, the overall market declined by 14.3%, of which Arawak Cement Company experienced a decline of 8.8% in domestic cement volumes compared to 2022. Trinidad and Tobago’s cement export volume fell by almost 11% when compared to 2022, due to supply chain constraints and an increase in the local market demand. This drop in cement exports was almost fully compensated by our clinker exports to Barbados that started in 2023 after Arawak Cement’s change in its operating model.”


Saudi Arabia: Cement sales in Saudi Arabia recorded a 12.5% increase in April 2024 to 2.92Mt, up from 2.6Mt in 2023, despite the impact of Ramadan. This is according to a report by Aljazira Capital. However, cement exports saw a significant decrease, dropping by 30% year-on-year to 554,000t from 790,000t. Additionally, clinker inventories reached 43.4Mt in April 2024, marking an 18% year-on-year increase and a 3% rise from March 2024.